1Discuss with the client and the client's accountant whether amalgamation will achieve the client's objectives

An amalgamation permits two or more corporations, including holding or subsidiary corporations, to be combined into one corporation with all the assets and liabilities of the amalgamating corporations.

The amalgamation provisions of the Ontario Business Corporations Act ("OBCA") are contained in ss. 174– 179, and the comparable provisions of the Canada Business Corporations Act ("CBCA") are contained in ss. 181–186.1. These provisions are quite similar.

Amalgamations are sometimes used in the context of a purchase of a business and also frequently as part of a reorganization, which may be undertaken for corporate or tax reasons.

Steps should be taken to ensure that the amalgamation will not result in adverse tax implications to the amalgamating corporations or their shareholders. It may also be necessary to review contracts, leases, licenses (both government and private sector), mortgages, security documents and agreements with suppliers, customers and employees to determine whether a consent or the giving of notice will be required prior to completing an amalgamation.

2Determine whether the corporations to be amalgamated are all governed by the same statute

All of the corporations to be amalgamated must be governed by the same statute. A CBCA corporation cannot amalgamate with an OBCA corporation or a corporation under the laws of another province or a jurisdiction outside of Canada. One of the corporations would need to be continued under the other statute as a pre-condition to the amalgamation.

3Determine whether the amalgamation can proceed as a short form amalgamation

You should determine at the outset whether the proposed amalgamation can meet the requirements for a short form amalgamation, which is simpler to accomplish. If it does not, you must proceed as a long form amalgamation.

Short form amalgamations (OBCA, ss. 177(1)–(2); CBCA, ss. 184(1)–(2))

A holding corporation and one or more of its subsidiary corporations may amalgamate in a vertical short form amalgamation.

Two or more wholly-owned subsidiary corporations of the same holding corporation may amalgamate in a horizontal short form amalgamation.

In each case, the directors must approve the amalgamation but shareholder approval and an amalgamation agreement are not required. Appraisal rights for dissenting shareholders are not triggered. There are four requirements that must be met:

Share cancellations

On a vertical amalgamation, the shares of each of the amalgamating subsidiary corporations must be cancelled without any repayment of capital. On a horizontal amalgamation, the shares of all but one of the amalgamating subsidiary corporations must be cancelled without any repayment of capital.

By-laws

The by-laws of the amalgamated corporation must be the same as the by-laws of the amalgamating holding corporation on a vertical amalgamation and the same as the by-laws of the amalgamating subsidiary corporation whose shares are not cancelled on a horizontal amalgamation.

Articles

The articles of amalgamation shall be the same as the articles of the amalgamating holding corporation on a vertical amalgamation and the same as the articles of the amalgamating subsidiary corporation whose shares are not cancelled on a horizontal amalgamation. The only change permitted to the articles on a vertical amalgamation is that a different name and a different registered office address may be used. There is more flexibility with a horizontal amalgamation since the articles may provide for

a different name

a different minimum and maximum number of directors

a different address for the registered office

imposition, variation or elimination of any restrictions on the business that the amalgamated corporation may exercise

Share issuances and stated capital additions

On a vertical amalgamation, no shares can be issued or assets distributed by the amalgamated corporation. On a horizontal amalgamation, the stated capital of the shares of the subsidiary corporations whose shares are cancelled must be added to the stated capital of the amalgamated subsidiary corporation whose shares are not cancelled.

4Complete the requirements for a long form amalgamation if a short form is not available

Amalgamation agreement required

The corporations proposing to amalgamate must enter into an amalgamation agreement which must deal with the following matters:

the basis on which holders of shares of each amalgamating corporation are to receive

securities of the amalgamated corporation

money, or

securities of any corporation other than the amalgamated corporation

the manner of paying money instead of issuing fractional shares

whether the by-laws of the amalgamated corporation are to be those of one of the amalgamating corporations

such other details to perfect the amalgamation and provide for the subsequent management and operation of the amalgamated corporation

Shareholder approval required

The shareholders of each amalgamating corporation must approve the amalgamation by special resolution.

The notice of meeting must include either a copy or a summary of the amalgamation agreement.

Shareholders of corporations amalgamating under the OBCA will be entitled to vote separately as a class, and shareholders not otherwise entitled to vote will be entitled to vote if the amalgamation agreement contains provisions that, if contained in articles of amendment, would require class voting and voting by all shareholders. Under the CBCA, shareholders are entitled to vote on a long form amalgamation whether or not they have the right to vote.

Dissenting shareholders are entitled to be paid the fair value of their shares (OBCA, s. 185; CBCA, s. 190).

5Prepare the articles of amalgamation and the director or officer statements

Whether an amalgamation proceeds as a short form or a long form, articles of amalgamation in the prescribed form must be filed in duplicate with the signature of an authorized officer or director and must contain all of the information that is required for articles of incorporation.

Director or officer statements (OBCA, s. 178(2); CBCA, s. 185(2))

Articles of amalgamation, for both short form and long form amalgamations, must have attached a statement of a director or an officer of each amalgamating corporation, which includes the following:

there are reasonable grounds for believing that

each amalgamating corporation is, and the amalgamated corporation will, be able to pay its liabilities as they become due, and

the realizable value of the amalgamated corporation's assets will not be less than the aggregate of its liabilities and stated capital of all classes

there are reasonable grounds for believing that

no creditor will be prejudiced by the amalgamation, or

adequate notice has been given to all known creditors of the amalgamating corporations

Under the CBCA, the statements must be in the form of a statutory declaration sworn by a director or officer.

Under the CBCA, the statements must be in the form of a statuatory declaration sworn by a director or officer.

Part b above is in the alternative; therefore, if the statement can be made that no creditor will be prejudiced by the amalgamation, then notice doesn't have to be given.

If the statement can't be made, then notice must be given in the manner specified, and the statement must contain information concerning the grounds upon which the objections of all creditors (who have notified the corporation that they object to the amalgamation) are either frivolous or vexatious.

It must indicate that the corporation has given notice to each person who has objected and the grounds upon which that person's objection is considered to be frivolous or vexatious. It must also indicate that a creditor who objects to the amalgamation can complain under s. 248, which is the oppression remedy section. The method of giving notice to creditors with a claim exceeding $2,500 is set out in s. 178(3) of the OBCA (CBCA, s. 185(3) with a $1,000 threshold).

6Determine the appropriate effective date

Amalgamations will result in a financial year-end for tax purposes, which means the preparation of financial statements and the filing of tax returns. For this reason, amalgamations are usually made to coincide with financial year-ends so that a new year-end is avoided.

Canada Revenue Agency takes the position for tax purposes that an amalgamation takes place as of the end of the day proceeding the date that it is filed. For example, in order to preserve a December 31 financial and tax year-end, the amalgamation should be filed on January 1 and not on December 31. As January 1 is a holiday, this is done by filing the articles of amalgamation in advance of the effective date and requesting an effective date that is later than the date of filing. Ontario accepts an effective date of up to 30 days later than the filing date. Care should be taken to ensure that any such request is in the covering letter in bold or highlighted letters and is drawn to the attention of the officials accepting the filing. In the absence of such a request, the effective date will be the date of filing.

7Prepare and file articles of amalgamation and other required items

Items to be filed for an OBCA amalgamation

Form 4, Articles of Amalgamation—completed in duplicate with original signatures on both copies

Schedule A—signed statement of a director or officer of each amalgamating corporation with the content required by s. 178(2) of the OBCA

Schedule B

on a long form amalgamation, a copy of the amalgamation agreement as adopted by special resolution under s. 176 of the OBCA

on a short form amalgamation a copy of the directors' resolution for each of the amalgamating corporations with the content required by s. 177 of the OBCA

Fee of $330 if 10 or fewer amalgamating corporations, or $500 if more than 10, payable to the Minister of Finance

Ontario-biased NUANS name search report, if the name of the amalgamating corporation is not a number name and not the name of one of the amalgamating corporations

Covering letter giving the name, address and phone number for an individual to contact

Items to be filed for a CBCA Amalgamation

Form 9, Articles of Amalgamation

Form 2, Initial Registered Office Address and First Board of Directors

A statutory declaration sworn by an officer or director of each amalgamating corporation with the content required by s. 185(2) of the CBCA

Fee of $200 payable to the Receiver General for Canada

A NUANS report if the name being adopted is not a number name and not the name of one of the amalgamating corporations

Covering letter to Corporations Canada indicating whether a NUANS report is enclosed and indicating the desired effective date if different from the filing date.

8Complete post-amalgamation organizational steps

While there is no requirement to do so, it is common practice to have an organizational meeting of the amalgamated corporation's directors, and often shareholders, to deal with the various organizational matters such as the adoption of by-laws, appointment of officers and adoption of the form of share certificates, as you would immediately following an incorporation. These matters could be dealt with in an amalgamation agreement on a long form amalgamation.

On a short form amalgamation, the by-laws of the surviving predecessor corporation are adopted as the by-laws of the amalgamated corporation, but other organizational matters such as appointment of officers and adoption of share certificates must still be dealt with.

There should be a new minute book for the amalgamated corporation, which will contain the same type of organizational resolutions as you would see in the minute book for a new incorporation. The Canada Revenue Agency requires that an amalgamated corporation obtain new tax filing numbers including for HST. As with a new incorporation, an initial return must be filed under the Corporations Information Act for the amalgamated corporation within 60 days of the date of the amalgamation.